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2016 (5) TMI 958 - ITAT CHENNAI

2016 (5) TMI 958 - ITAT CHENNAI - [2016] 48 ITR (Trib) 13 - Revision u/s 263 - CIT(A) directing the AO to pass fresh assessment order which is completed u/s.153A r.w.s.143(3) - Held that:- Commissioner of Income Tax has not independently arrived satisfaction with the order of the Assessing Officer as erroneous and prejudicial to the interest of the Revenue. The Commissioner of Income Tax u/s.263 cannot be invoked to correct each and every type of mistake or error committed by the Assessing Offic .....

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e the Commissioner of Income Tax wanted to consider the statement of affairs filed by the assessee during the course of assessment u/s.153A though it was not part of the seized material and it cannot be considered for framing assessment u/s.153A of the Act as assessment for the assessment year 2006-07 has already been completed u/s.143(3) and re-assessment u/s.153A be made only on the basis of incriminating material found in the course of search but not produced in the course of original assessm .....

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R> The revision order passed for the assessment years 2007- 08, 2008-09, 2009-10, 2010-11 and 2011-12 were mere aftermath to the order passed u/s.263 for the assessment year 2006-07. The Commissioner of Income Tax himself agreed that findings for assessment year 2006-07 having cascading effect on the subsequent assessment years i.e from 2007-08 to 2012- 2013. Since, we have cancelled the revision order for the assessment year 2006-07 on the basis on which revision order for the other assessment .....

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, ACCOUNTANT MEMBER: This appeal is filed by the Assessee is directed against the order of the Learned Commissioner of Income Tax, Central-I, Chennai dated 30.03.2015 pertaining to the assessment year 2012-13. 2. The grievance of the assessee in this appeal is with regard to invoking the provisions of the section 263 of the Act, thereby directing the AO to pass fresh assessment order which is completed u/s.153A r.w.s.143(3) of the Act dated 28.03.2014, though there was no incriminating materials .....

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receivable from some of the debtors. It was also noticed by the Commissioner of Income Tax that the opening capital balance for the year 2006-07 and the capital account for the subsequent years was not properly reconciled by the assessee during the course of the proceedings u/s 153A r.w.s.143(3). It was further noticed by the Commissioner of Income Tax that the Cash Flow Statement furnished by the assessee indicating drawings and justifying the cash found during the course of search at ₹ 1 .....

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e to paucity of time as the information was filed before Assessing Officer only on 28.3.2014. 4. From the proposals sent by the Assessing Officer, it was noticed that the assessee has filed three Statement of Affairs for the year- 2006-07 - i) Statement of Affairs along with the return u/s 139(1) ii) During the course of proceedings u/s 143(3) and iii) During the proceedings u/s 153A in the financial year 2013-2014. All the three Statement of Affairs are different among themselves. During the co .....

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: 15,25,96,482/- Difference in the Capital Account : 22,90,232/- The ld. Authorised Representative for assessee vide letter dated 22.12.2009 before Commissioner of Income Tax has stated that the closing balance kept with Indian Bank Porur (Rs. 3,86,774/) Bank of Baroda (Rs. .12,12,517/-) and SB account with Egmore Benefit Society Ltd (Rs. 21,897/-) not reduced than the corresponding capital account balance figure would be ₹ 15,09,75,204/-. The difference of ₹ 6,68,954/- offered to t .....

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preferred an appeal before the Commissioner of Income Tax (Appeals) against original assessment order passed u/s.143(3) of the Act. 5. On appeal, the Commissioner of Income Tax (Appeals) given relief to the assessee. Further on contesting before the ITAT, the matter was set aside with the direction to the Assessing Officer to reexamine the statement of affairs vide their orders No. 986/MDS/2012 dated 12.09.2012. 6. While re-examining, comparing and contrasting the two Statement of Affairs for b .....

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of Affairs which could not be examined properly by the Assessing Officer during the proceedings u/s 153A finalized on 28.3.2014. Thus, the acceptance of the Revised Statement of Affairs was suffering from defects resulting in a assessment erroneous and prejudicial to the interests of revenue. 6.1 The assessee filed revised statement of affairs for assessment year 2005-06, figures of which are basis for opening balances of assessment year 2006-07. Following major discrepancies are as under (a) f .....

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78,171/-+ 1,00,000/-+13,61,60,759/-) from Rs. .21,06,23,375/- (difference Rs. 22,19,29,721/-) liable to be considered as un-explained investment. 6.2. Comparison of three statement of affairs for assessment year 2006-2007 has shown following discrepancies. a) The first SOA shows loan received (balance) of Rs. 15,83,40,723/-, the second does not show any balance on this account and in third SOA the balance of loan received has been decreased to Rs. 5,32,54,907/-. It implies that either the assess .....

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ssee has never produced complete books of accounts so that the source could have been ascertained. b) Ori ginally the total balance of loan paid was shown at Rs. 28,55,32,805/-. In second statement of affairs shown loan paid balance amounting to Rs. 11,69,94,360/- and it has now been increased to Rs. 31,39,82,017/-(133369665+ 36578171 +100000+ 143934181). The difference is visible. The assessee has even changed the balance with M/s. TCP which was earlier shown as Rs. 11,69,94,360/- and now it is .....

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OA did not include this item at all but in third statement of affairs filed on 28/03/2014, the balance on this account has been shown at Rs. 33,70,54,907/-. Although there is increase in loan received balances if compared with the SOA for AY 2006-07 filed on 28/03/2014, yet difference balances shown in statement of affairs originally filed and the SOA filed on 28/03/2014 is not explainable. (b) Balances of loan paid was shown at Rs. 52,45,95,954/- in SOA originally filed which stood reduced to R .....

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en list of balances of loan received and paid during the assessment proceedings u/s 143(3) taken up against return filed u/s 139(1). The assessee has furnished a list of such loan paid and loan received balances as per SOA filed on 28/03/2014. It is noticed that there is huge difference in the total as well as individual name wise details of loan received and paid when compared with the list given earlier. A comparison is given hereunder:- Loan paid balance as on 31.03.2007 (f) The assessee vide .....

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id . Hence, the C.I.T invoked the provisions of sec.263 in setting aside the assessment and had given direction to A.O to arrive at the opening and closing balance of capital based upon the reconciliation for the A.Y.2006-07. The proposals on inadequate drawings and tax liability of seized jewellery are dropped. 7. We have heard both the parties and perused the material on record. The identical issue came before this Tribunal in assessee's own case for assessment years 2006-07 to 2011-12 in .....

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ssessment for the assessment year 2006-07 was framed u/s.153A r.w.s.143(3) of the Act vide order dated 28.03.2014, wherein the Assessing Officer computed assessed income at Rs. 3,12,33,973/- as he did in u/s.143(3) of the Act. In other words, there was no addition of whatsoever to the returned income consequent to search action. However, as evident from the para one of order passed by the Commissioner of Income Tax passed u/s.263 of the Act, the Assessing Officer could not examine certain issues .....

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and justifying the cash found during the course of search at Rs. 14,50,000/- cannot be accepted as the drawings reflected in such Cash Flow Statement would not have been adequate for the assessee s life style and the Assessing Officer has accordingly proposed to estimate the drawings at a higher level and thus add back the cash found during search as unexplained cash since not supported by the Cash Flow Statement filed. For all these deficiencies, the Assessing Officer has proposed that the asse .....

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the year- 2006-07 - i) Statement of Affairs along with the return u/s 139(1) ii) During the course of proceedings u/s 143(3) and iii) During the proceedings u/s 153A in the financial year 2013-2014. All the three Statement of Affairs are different among themselves. During the course of the proceedings u/s 143(3) finalized on 31.12.2009, the Assessing Officer has analyzed the Statement of Affairs for the assessment years 2006-07 and 2007-08 and has made additions in the Asst.Year 2007-08 as below .....

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th Indian Bank Porur (Rs. 3,86,774/-), Bank of Baroda (Rs. .12,12,517/-) and SB account with Egmore Benefit Society Ltd (Rs. 21,897/-) not reduced than the corresponding capital account balance figure would be Rs. 15,09,75,204/- The difference of Rs. 6,68,954/- offered to tax. The assessee's representative contention was not be accepted by Commissioner of Income Tax as the assessee's business in money lending, and the assessee has not charging interest from the person to whom money has b .....

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2012 vide its order dated 12.09.2012, directed the Assessing Officer to re-examine the statement of affairs filed by the assessee. 19. Inspite of this, now the Commissioner of Income Tax wanted to review the order of the Assessing Officer passed u/s.153A r.w.s 143(3) dated 28.03.2014. First of all u/s.263 of the Act, the Commissioner of Income Tax must call for examining the records of the proceedings under Act and after examining the same if he came to a conclusion that the order passed by the .....

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he Act in the present case, it is evident from the first para of the impugned order that the Commissioner of Income Tax acted upon the proposal sent by the Assessing Officer which is not permitted u/s.263 of the Act. 20. Further issue raised by the Commissioner of Income Tax is subject matter of appeal in respect of original assessment passed u/s.143(3) of the Act before the Tribunal for the assessment year 2007-08. The original assessment order passed u/s.143(3) was set aside by the Tribunal an .....

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essing Officer ceases to exist and merges in the order of the Tribunal and thereafter, the Tribunal order stands and is operative and not the original assessment order. Then it is to be noted that Commissioner of Income Tax through proceedings u/s.263 cannot sit over on the order of the Tribunal so as to decide what is right or wrong. In other words, in respect of any issue which was subject matter of the appeal before the Tribunal and the Tribunal decided it one way or other, the Commissioner o .....

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s. 12,15,79,373/- for the assessment year 2007-08. When these differences were sought to be explained by the assessee, the assessee has come up with another revised Statement of Affairs as substantial differences in the balances of Assets and Liabilities. There was substantial discrepancies in the three Statements of Affairs which could not be examined properly by the Assessing Officer during the proceedings u/s 153A finalized on 28.3.2014. Thus, the acceptance of the Revised Statement of Affair .....

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Assessing Officer is obliged to issue notice under section 153A in respect of six preceding years, preceding the year in which search etc. has been initiated. Thereafter, he has to assess or reassesses the total income of these six years. It is obligatory on the part of the Assessing Officer to assess or reassess total income of the six years as provided in section 153A(1)(b) and reiterated in the 1st proviso to this section. The second proviso states that the assessment or reassessment pending .....

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l now be made under section 153A. The case of the assessee is that necessary corollary to this provision is that completed assessment shall not abate. These assessments become final except in so far and to the extent as undisclosed income is found in the course of search. On the other hand, it has been argued by the revenue that abatement of pending assessment is only for the purpose of avoiding two assessments for the same year, one being regular assessment and the other being assessment under .....

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ause hardship to some assessees where one or more of such assessments has or have been completed before the date of initiation of search. This is hardly of any relevance in view clear and unambiguous words used by the Legislature. This interpretation does not cause any absurd etc. results. There is no casus omisus and supplying any would be against the legislative intent and against the very rule in this behalf that it should be supplied for the purpose of achieving legislative intent. The submi .....

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on (1) is annulled in appeal etc., then the abated assessment revives. However, if such annulment is further nullified, the assessment again abates. The case of the assessee is that this provision further shows that completed assessments stand on a different footing from the pending assessments because appeals etc. proceedings continue to remain in force in case of completed assessments and their fate depends upon subsequent orders in appeal. On consideration of the provision and the submissions .....

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h. 22. The provision contained in section 132(1) empowers the officer to issue a warrant of search of the premises of a person where anyone or more of conditions mentioned therein is or are satisfied, i.e. (a) summons or notice has been issued to produce books of account or other documents but such books of account or documents have not been produced, (b) summons or notice has been or might be issued, he will not produce the books of account or other documents mentioned therein, or (c) he is in .....

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ditions on satisfaction of which a warrant of search can be issued will have to be taken into account. 23. Having held so, an assessment or reassessment under section 153A arises only 'When a search has been initiated and conducted. Therefore, such an assessment has a vital link with the initiation and conduct of the search. A search can be authorized on satisfaction of one of the three conditions enumerated earlier. Therefore, while interpreting the provision contained in section 153A, all .....

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ng the year of search. The word used is shall and, thus, there is no option but to issue such a notice. Thereafter he has to assess or reassess total income of these six years. In this respect also, the word used is shall' and, therefore, the Assessing Officer has no option but to assess or reassess the total income of these six years. The pending proceedings shall abate. This means that out of six years, if any assessment or reassessment is pending on the date of initiation of the search, i .....

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ssment shall revive. This means that the assessment or reassessment, which had abated, shall be made, for which extension of time has been provided under section 153B. 25. The question now is - what is the scope of assessment or reassessment of total income under section I53A(1)(b) and the first proviso? For answering this question, guidance will have to be sought from section 132(1). If any books of account or other documents relevant to the assessment had not been produced in the course of ori .....

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to make original assessment and assessment under section 153A merge into one and only one assessment for each assessment year shall be made separately on the basis of the findings of the search and any other material existing or brought on the record of the Assessing Officer, (b) in respect of non-abated assessments, the assessment will be made on the basis of books of account or other documents not produced in the course of original assessment but found in the course of search, and undisclosed .....

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53A for which assessments shall be made for each of the six assessment years separately and in other cases, in addition to the income that has already been assessed, the assessment under section 153A will be made on the basis of incriminating material, which in the context of relevant provisions means - books of account,, other document, found in the course of search but not produced in the course of original assessment, and undisclosed income or property discovered in the course of search. 28. .....

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(3) of the Act. Later once again during the assessment proceedings u/s.153A of the Act, the Commissioner of Income Tax observed that there were difference between three statements filed by the assessee when compared to each other. The Commissioner of Income Tax wanted to bring difference between these statements for taxation. Thus, it means that there was no incriminating material found during the course of search action u/s.132 of the Act. 28.2. In view of the above, the original assessment ord .....

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o allegation that the assessee has failed to produce books of accounts and documents in the course of original documents. It is also a fact that recorded by Commissioner of Income Tax that the Assessing Officer failed to examine the books of accounts produced by him due to paucity of time and the Assessing Officer proposed the Commissioner of Income Tax to review the order u/s.153A of the Act. 29. In our opinion, the Commissioner of Income Tax wanted to do the things indirectly which cannot be d .....

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prejudicial to the interest of the Revenue. The Commissioner of Income Tax u/s.263 cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer and it was only when an order is erroneous that the section will be attracted. In the present case there is no incorrect assumption of facts or an incorrect application of law by the Assessing Officer. The Assessing Officer has applied his mind to the seized material while framing assessment for the year 2006-0 .....

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been completed u/s.143(3) and re-assessment u/s.153A be made only on the basis of incriminating material found in the course of search but not produced in the course of original assessment. In the present case, the Commissioner of Income Tax categorically observed whatever statements on record were already produced by the assessee both in the course of original assessment u/s.143(3) and also in assessment proceedings u/s.153A of the Act. The Assessing Officer adopted one of the course permissibl .....

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n place of the income estimated by the Assessing Officer. In our opinion, the Assessing Officer exercises quasi-judicial power vested in his hands and if he exercises such power in accordance with law and arrive at a conclusion, such conclusion cannot be termed to be erroneous simply because the Commissioner of Income Tax wanted to do further enquiry as he has not satisfied with the enquiry made by the Assessing Officer. In the present case, the Assessing Officer made enquiry both in the course .....

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